Oil rises towards $53 ahead of US toxic asset plan

Oil rises towards $53 ahead of US toxic asset plan
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First Published: Mon, Mar 23 2009. 09 10 AM IST
Updated: Mon, Mar 23 2009. 09 10 AM IST
Perth: Oil rose over 1% towards $53 a barrel on Monday, bolstered by expectations that the US Treasury’s efforts to stabilise the ailing financial system would speed up a recovery of the US economy.
The US Treasury Department said Secretary Timothy Geithner will hold a briefing at 8:45am on Monday to talk about wide-ranging efforts to stabilise the financial system through pumping cash into faltering banks and other attempts to increase lending.
US light crude for May delivery rose 62 cents to $52.67 a barrel by 5:10am, while London Brent crude rose 60 cents to $54.40.
“There are expectations that the US Treasury will deliver a plan that will bolster prospects for the financial sector and that’s probably helping crude this morning,” said Toby Hassall, head of research at Commodities Warrants Australia.
“There are also expectations that the U.S. dollar will fall further this week and that is providing support for oil as well as other commodities, including gold.”
The latest plan will aim to attract private investors by offering abundant loans and generous terms and is targeted at banks and insurance companies given their large holdings of mortgages and other hard-to-price assets, a source familiar with the plan said on Saturday.
The announcement lifted the S&P 500 stock index futures at the start of electronic trading by 4.1 points.
Weakness in the US dollar also offered support to oil prices. The dollar rebounded on Friday but still recorded its biggest weekly slide since 1985 as the Federal Reserve’s plans to buy long-term government debt stoked fear about the erosion of the US currency.
President Barack Obama said on Sunday the US dollar is still strong but warned that excessive borrowing and high deficits could weaken Treasury bill demand.
Crude has fallen nearly $100 from highs above $147 a barrel last July, as the global economic crash has shrunk demand for the fuel.
But Opec’s curbs on output by 4.2 million barrels per day (bpd) and efforts by the US government to revive the economy have helped oil prices to stabilise at between $40-$50 a barrel, after falling to levels below $35 last month.
Still, analysts cautioned that near-term demand for oil remains weak and crude’s recent rally may be limited.
“There won’t be a recovery in oil’s demand in the short term,” Hassall said.
The global economy is set to shrink by one to two percent this year, World Bank President Robert Zoellick said on Saturday, saying the depth of the slowdown was unprecedented since the 1930s Great Depression.
Crude oil speculators on the New York Mercantile Exchange shifted to a net long position in the week to 17 March, according to data from the U.S. Commodity Futures Trading Commission released on Friday.
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First Published: Mon, Mar 23 2009. 09 10 AM IST
More Topics: Markets | Oil | Crude | Prices | Opec |